Evening Standard Comment: Mr Osborne’s difficult balancing act on tax

Key issue: The Chancellor's decision on tax measures will inevitably be informed in part by electoral calculation

The 50p top rate of tax is becoming the key issue of the Chancellor’s forthcoming Budget.

This week has seen lobbying by some business leaders for a cut and rumours of a Lib-Dem deal to do so at the price of a “mansion tax”. A cut remains political risky, as highlighted by today’s warning to the Chancellor from Conservative MPs in marginal constituencies, nervous about the message it might send to middle England. But ultimately the Chancellor should make his decision not on expediency but on what is fiscally wise and best for the economy.

The 50p rate is particularly significant for London, given the concentration of high earners in the capital, especially in the financial sector. Anything that sends a signal that the Government punishes wealth creation is potentially damaging to the City. Meanwhile tax cuts should stimulate the economy — although a cut to the 40p rate would arguably stimulate it more than dropping the 50p rate.

Against the economic benefits of such tax cuts, the Chancellor will argue for the primacy of cutting the deficit and thereby maintaining Britain’s international credibility. Cutting the 50p rate would create a significant fiscal hole to plug, at a time of austerity: the Treasury estimates that keeping the rate at 50p rather than having a top rate of 40p will bring in £12.6 billion over five years. But such projected gains could be wiped out if a higher rate drives away international businesses.

Mr Osborne is a politician: his decision on tax measures will inevitably be informed in part by electoral calculation. But he should beware of the danger of the current debate on taxes becoming more about punishing wealth rather than doing what is best for our economy.

Blame the terrorists

The deaths of a Briton and an Italian in Nigeria, following an attempt to rescue them from jihadist kidnappers, are deeply regrettable. Nevertheless, the diplomatic row now blowing up between Italy and the UK over the affair is quite unnecessary. British special forces were trying to rescue Chris McManus and Franco Lamolinara, kidnapped last May by a faction of the al Qaeda-aligned group, Boko Haram. The Italians were not informed in advance — hence the ire of some Italian parliamentarians. Yet such a delicate operation could easily have been compromised by an international debate over tactics .

Such missions are fraught with risk. They can succeed spectacularly, such as the rescue in January by US Navy Seals of an American woman and a Danish man kidnapped in Somalia. Or something can go tragically wrong in a split second, as with kidnapped Scottish aid worker Linda Norgrove in Afghanistan last October, accidentally killed by a US grenade — or in Nigeria, where the kidnappers appear to have killed the hostages first. There should be no doubt where the real blame lies, however: with the Islamic extremists responsible, and not with the rescuers or the British government.

Rail fare threat

To be sure, government plans for “smartcards” similar to Oyster cards on the rail network could offer travellers potential benefits. Yet such innovations should not be used as a cover to bring in new, even higher and more complex fares than already exist — such as the “super-peak” fares mooted in yesterday’s consultation paper. London’s commuters already pay eye-watering fares just to get to work. Higher fares would simply be a tax on London, and on jobs. For Transport Secretary Justine Greening to allow them would be sheer folly.